Banks are also putting up their charges at the fastest rate since the survey began in 1989. Commissions and fees have risen for six successive quarters.
The banks expect a further widening of spreads on their loans and strong growth in commissions and fees in the next three months.
The combination of lower costs and higher income allowed the banks to improve profitability in the second quarter and this trend is expected to accelerate in the third.
The quarterly survey of financial services finds that confidence has risen - apart from in banks and building societies - but activity remains well below normal.
Cost cutting has continued, mainly by shedding jobs. There have also been reductions in training, so staff costs have shown a marked overall decline.
Replies from banks showed the most severe staff reduction since the survey began in 1989, well ahead of expectations in the spring. A further sharp reduction is expected in the next three months.
Building societies showed a similar pattern, and general insurance companies also cut jobs at a record rate.
The building societies reported that the fall in their consumer business was much faster than had been expected, although they believed there would be a small improvement in the next few months.
The CBI said that uncertainty about prospects was holding back investment, and spending on information technology was set to fall for the first time since the survey started.
Overall profitability in financial services was improving, with income rising and costs falling, and this trend was expected to continue in the next quarter.
The survey found that 30 per cent of financial services firms expected business volumes to rise in the third quarter compared with 4 per cent expecting a fall.Reuse content